THE STRATEGIC OPTIMIZATION AND EXPORTATION OF LOCALLY MANUFACTURED PRODUCTS IN NIGERIA

CHAPTER ONE

1.0 INTRODUCTION

All over the world, Nigeria inclusive, export promotion policies as an outward oriented development strategy have been areas of interests to both policy -makers and economists. Nigeria attained independence in 1960, export promotion of primary and secondary exports has been considered as a major ingredient in the long - run development programme of economy.

At independence, the Nigeria economy was essentially ma primary product exporter based on a two- pillar product, agricultural and mineral products. Between the period of 1960 and 1996, the major agricultural products contributed about 72 percent of total export value. However, since the emergence of crude oil on the economy scene, the share of agricultural products in total export value has continued to decline. It declined as far as 3%. In 1984, but increased marginally to about 6% in 1988. In fact, the two global oil price shocks of 1973/74 and 1979 virtually made the economy a mono - product exporter in which the contribution of the oil sector to total export value increased by about 37% in 1989 from 57% in 1970 to 95% in 1989 (CBN Nigeria's Principal Economic and Financial Indicators 1970 ­1990). Moreover, the oil sector has become the major source of foreign exchange earnings to the government contributing more than 90% annually. For instance, the revenue accruing to the government through the petroleum profits tax increased by about 368% in 1989 from N 5.16 billion in 1979 to about N 24.16 billion in 1989.

The Nigerian manufacturing sector, fuelled by this buoyant oil revenues and heavy  public investments grew rapidly at an average rate of about 12% per annum between 1973 and 1983, compared with a growth of Gross Domestic Product (GDP) of about 4% per annum. A detailed analysis of the manufacturing sector indicated that the share of the sector in GDP rose from 4% in 1973 to a peak of about, 12% IN 1982 (FMBP, 1990). This impressive achievement was a result of the import substitution industrialization strategy adopted during the period with its major impetus on the growth of domestic demand for industrial output.

Thus, in order to correct this distortion in the economy emanating from 1980s oil boom - burst cycles, the current policy - makers introduced the structural Adjustment Programme (SAP) in 1986 of which the export ­oriented strategy is a sector - specific policy.

The adjustment process, as a whole, is expected to effectively alter and restructure the consumption and production patterns of the economy through the restructuring of the import and export structures.

Accordingly, the industrial development is being stimulated through the export promotion policies of the government. Some of the policies that are being put in place include 100% export proceeds retention by exporters" a duty draw - back suspension scheme (increased by about 400% from N 10 million in 1990 to N 50 minion in 1991), the manu8facturing Bond Scheme and the other functions of the Nigerian Export and import Bank (NEXIM) that are directed at stimulating international trade.

1.1 BACKGROUND TO THE STUDY

Resources are abounding in Nigeria to fully employers all citizens and accommodate people from other countries. However, our inability to  optimally  utilize the nations abundant natural resources has been responsible for the information rate, poor rate of infrastructure and very low standard of living in Nigeria.

One of the solutions to the above enumerated problems is the creation of awareness of resources available and their utilization, thus the best way out of these problems is to evolve strategies that would enable such nation utilize all these resources. One of such ways is through an aggressive processing of locally manufactured products for exportation.

Moreover, Nigeria economy is been dominated by imported foreign goods and products and the orientation of an average citizen is that imported goods and products are better than locally manufactured products. Also Nigeria economy as now become a dumping ground for most of these imported goods thereby flooding the market and giving very little chance of survival to local manufacturers. Sometimes the option of an average Nigeria is that a "locally manufactured products are low in quality. This may at times be incorrect as cases as proven that same locally manufactured product are better than the imported ones.

Government has a lot to do in encouraging manufacturers to embark on an extensive and aggressive export promotion. This government can do by formulating policies that will favour of local manufacturers. Such government policies can include increase the import tariffs to scare away or reduce the quantity of product imported or using of quota system whereby quota's are allocated i.e specific quantities are placed on imported products. All this are important, in other to allow locally manufactured products to compete favourably in the market before they can think of export. This is because a weak product that is locally manufactured in the market never can be considered to be exported to external market.

Local manufacturers on their part must improve in the standard and quality of their product to meet the local consumer's taste and at the same time and be of international quality and standard to be exported. Also manufacturers must try to operate at optimum level in terms of resource utilization, efficient human cum managerial resources allocation and effective cost of production and method of production. All this must be at optimality for a manufacturing company to fully utilize its overall resources and capacity. Thus manufacturers must locate a strategic level to obtain an optimal point for exportation of their products.

Nigeria's export trade is dominated by crude oil, which accounted for 95%  of Nigeria's total value of exports in 1979 till date. The agricultural commodities such as cotton, timber, coca, groundnuts, and palm oil and kernels that used to be the back bone of our export now contribute only 5% of total value. There have been absolute decrease in the value of exports of some cash crops, likely cotton, groundnuts, palm oil and pal\m kernel is now being imported.

Manufacturing industries contributed only a meagre 1 % in the total value. This underscore the fact that typical Nigeria manufacturer is not yet ready for international marketing in recognition of the danger in depending heavily on imported commodities, the Federal Government has taken measure to promote non-oil growth. The Nigerian Export Promotion Council (NEPC) was established through decree No. 26 of 1976 to spear head export growth and intensification. Also Nigeria export and import Bank (NEXIM) was established in January 1990 to boost Nigeria's non-oil export sector.

Export will have a positive on the quality of locally manufactured production.

1.2     STATEMENT OF PROBLEM

Despite the abundant endowment with rich natural human and mineral resources, the Nigeria economy is currently in a weak state its weakness derives from:

a.                 Dependence on oil for about 95% of its foreign exchange earnings thus making it weak to negative development in the world oil market oil is highly political commodity and hence very changeable in nature.

b.                 Poor economic value added activities through manufacturing. Most of our export apart from oil are mostly raw commodities yielding gain to exporters.

As Nigeria is passing through a difficult economic life, which affects the populace in no small measure, a numbers of question would therefore need to be answered.

1.                To what extent does Nigeria participate in export marketing of locally manufactured. products which have been identified as the only solution to its economic problems to enhance standard of living of the people.

2.                How many organization are aware of export potentials of locally manufactured products.

3.                What is the roles of private and public investors in the development of the manufacturing sector of the economy?

4.                What problems are on the way of organizations m achieving successful export marketing for locally manufactured products?

5.                Has the country provide enabling environment for production and exportation of locally manufactured products.

1.3 OBJECTIVE OF THE STUDY

The reason of carrying out this research work include:

a        To review the contribution of locally manufacturer products exports to the national economy.

b.                 To reduce the balance of payment deficit through exports of locally

manufactured products.

c.                  It aims at reducing the high level of dependability on imported goods.

d.                 Tax free interest earned on exports loans.

e.                  Higher capital tax depreciation allowance for manufacturing exports.

f.                   A development fund created to assist exporters

g.       To adjust fund to provide additional cash subsidy to exporters.

1.4     SIGNIFICANCE OF THE STUDY

This research work is proactive in nature as not much work has been carried out on promotion of locally manufactured products for export purposes. Presently, activities in the sectors is low as the national policy on manufactured products exports have been released; but the fact still remains that export marketers have identified these products, analysed their potentials in the international market and have. corroborated its uses and economic importance. The commentaries of the world trade organization of the millennium provide a challenge to any good export marketer and an attempt will be made or how best to sell these products internationally.

This research work has the significance of awakening awareness and revealing the importance, problems, and prospect associated with export marketing in the area of locally manufactured products. It will also expose the needs of exporters as well as government sponsored promotional activities and incentives to encourage investors to the sub- sector.

It is therefore, expected that apart from serving as a partial academic fulfillment requirement for bachelor's degree, the study generate awareness in those organization that have not been thinking of about export marketing orientation in view of its economic benefits. Offer encouragement to those of them already practising export marketing and finally, based on the findings, I  hope to make recommendations that would enable the firms to improve their performance so that their cooperate objectives are not only realized efficiently, but also their contributions to the economy and social development to Nigeria could be felt.

1.5 RESEARCH QUESTIONS

         (a)      How will export of locally manufactured products contribute to the national economy?

         (b)     How will export of locally manufactured products reduces the dependability level of imported goods?

          (c)      To what level will locally manufactured products reduces the balance of payment deficit?

         (d)     What will be the effect of improved quality of locally manufactured products on export?